Correlation Between Mustika Ratu and Merck Tbk
Can any of the company-specific risk be diversified away by investing in both Mustika Ratu and Merck Tbk at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Mustika Ratu and Merck Tbk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mustika Ratu Tbk and Merck Tbk, you can compare the effects of market volatilities on Mustika Ratu and Merck Tbk and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Mustika Ratu with a short position of Merck Tbk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mustika Ratu and Merck Tbk.
Diversification Opportunities for Mustika Ratu and Merck Tbk
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mustika and Merck is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Mustika Ratu Tbk and Merck Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Tbk and Mustika Ratu is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Mustika Ratu Tbk are associated (or correlated) with Merck Tbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Tbk has no effect on the direction of Mustika Ratu i.e., Mustika Ratu and Merck Tbk go up and down completely randomly.
Pair Corralation between Mustika Ratu and Merck Tbk
Assuming the 90 days trading horizon Mustika Ratu Tbk is expected to under-perform the Merck Tbk. In addition to that, Mustika Ratu is 4.84 times more volatile than Merck Tbk. It trades about -0.04 of its total potential returns per unit of risk. Merck Tbk is currently generating about -0.05 per unit of volatility. If you would invest 414,325 in Merck Tbk on August 27, 2024 and sell it today you would lose (68,325) from holding Merck Tbk or give up 16.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mustika Ratu Tbk vs. Merck Tbk
Performance |
| Timeline |
| Mustika Ratu Tbk |
| Merck Tbk |
Mustika Ratu and Merck Tbk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mustika Ratu and Merck Tbk
The main advantage of trading using opposite Mustika Ratu and Merck Tbk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mustika Ratu position performs unexpectedly, Merck Tbk can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Merck Tbk will offset losses from the drop in Merck Tbk's long position.The idea behind Mustika Ratu Tbk and Merck Tbk pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Merck Tbk vs. Astra Graphia Tbk | Merck Tbk vs. Hexindo Adiperkasa Tbk | Merck Tbk vs. Lautan Luas Tbk | Merck Tbk vs. Citra Marga Nusaphala |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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